When you're in urgent need of funds—whether for education, medical emergencies, or short-term business needs—a loan against your LIC policy might seem like a smart, low-interest option. But is it the right move?
Vizzve Finance helps you understand how it works, its benefits and limitations, and whether a personal loan or policy loan suits you better.
🔍 What Is a Loan Against LIC Policy?
A loan against an LIC policy is a secured loan where your life insurance policy acts as collateral. LIC (Life Insurance Corporation of India) allows loans against specific traditional policies (not term plans), provided they have accumulated a surrender value.
✅ Eligibility Criteria
You must own an LIC endowment or whole life plan
The policy should have completed at least 3 years
It must have a surrender value
The policy should be in force (active with timely premium payments)
💡 Key Features
| Feature | Details |
|---|---|
| Loan Amount | Up to 90% of surrender value |
| Interest Rate | ~9%–10% (subject to change by LIC) |
| Tenure | Usually 6 months to the term's end |
| Collateral | Your LIC policy |
| Repayment Flexibility | Interest can be paid separately or with principal |
🟢 Benefits of Taking a Loan Against LIC
Lower interest rates than unsecured personal loans
No credit score check required
Quick processing
No need to liquidate investments
✅ Vizzve Tip: This can be a great alternative if your CIBIL score is low, and you're unable to get loans elsewhere.
🔴 Risks & Limitations to Consider
Loan is only available after 3 years of policy life
Only traditional plans (endowment/whole life) are eligible
If not repaid, the loan amount and interest will be deducted from maturity or death benefit
Policy lapses if premiums or interest are unpaid
You’re borrowing against your life cover—which reduces long-term benefits
💡 When Should You Choose a Loan Against LIC Policy?
Short-term urgent needs (within 6–18 months)
You want to avoid a personal loan or EMI burden
You have an old policy with high surrender value
Your CIBIL score is low and you need quick access to funds
🚀 Vizzve Finance Recommendation
If your LIC policy doesn’t offer enough value, or the surrender value is too low, consider:
✅ Personal Loans from Vizzve Finance:
Instant disbursal
Minimum documentation
Loans even with average credit scores
Fixed EMIs and transparent charges
Flexible tenure up to 5 years
FAQs
Q1: Can I get a loan against a term insurance policy?
A: No. Loans are only allowed on traditional plans like endowment or whole life policies.
Q2: Is the loan available from LIC only?
A: No. Many banks and NBFCs also offer loans against LIC policies. But interest rates and terms vary
.
Q3: What happens if I don’t repay the loan?
A: LIC deducts the outstanding amount from your maturity payout or death benefit.
Q4: Is it better to take a personal loan instead?
A: If your policy value is low or your loan needs are high, a Vizzve personal loan may offer better flexibility and tenure options.
Published on 3rd july
Publisher : SMITA
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RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed.